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This paper examines whether the risk-taking incentives induced by performance-based vesting (p-v) compensation influence bank loan contracting and credit ratings. Consistent with our risk-shifting hypothesis, we find that the p-v based compensation, as measured by the proportion of grant date...
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This paper investigates the effects of regulatory interventions on contracting relationships within firms by examining the impacts of the Sarbanes–Oxley (SOX) Act on CEO compensation. Using panel data of the S&P 1500 firms, it quantifies welfare gains from a principal–agent model with hidden...
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This study adopts behavioral contract theory through a mathematical model and clarifies the situation in which a fixed …–salary contract is preferable to incentives–based one for the principal. Theoretically, the expected utility for the principal is … higher under an incentives–based contract but, in reality, there are companies that employ people via fixed–salary contracts …
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